In practice: How TIAA's General Account approaches asset-based finance

Why has private ABF grown into such an important allocation for the TIAA General Account?

As with any insurance company general account portfolio, we manage our assets to the liabilities based on core asset liability management principles. One key aspect of our liabilities is that they are relatively illiquid. As such, we are able to capitalize on the illiquidity and complexity premiums offered by private fixed income over public markets. Furthermore, as we have seen during times of market stress, public market liquidity often hasn't been there when you actually need it, so investors end up paying up for liquidity that is rarely used.

Beyond that, TIAA as an insurance entity maintains the highest possible ratings with all major rating agencies. In support of these ratings, the general account focuses on resilience and long-term returns. Our private ABF holdings as we've structured them fit our mandate well, emphasizing disciplined underwriting, a clear understanding of underlying risks, and strong structural protections, including appropriate levels of subordination.

The ABF universe is extremely broad. How do you think about what fits and what doesn't for your portfolio?

We start with a simple question: Will the cash flows hold up through a cycle? Not all ABF strategies clear that bar. For example, consumer credit strategies tend to be more cyclical and sensitive to economic conditions. On the other hand, collateral tied to commercial businesses or infrastructure assets tend to be more stable, where structural and legal protections are clearer. The objective is consistency and resilience, such that the portfolio can perform through all market environments including those where markets are stressed.

Sourcing has become a major focus. How do you think about the different models and their tradeoffs?

There is a spectrum of sourcing models from syndicated transactions created by banks to managers who own their own origination platforms.

Syndicated deals offer efficient access, but investors often pay for structuring and distribution, which can compress returns, particularly as demand has increased in recent years. At the other end, investing through managers with proprietary origination platforms can provide better economics and differentiated access to collateral, but this approach requires careful underwriting of the platform itself. When revenue is driven by origination volume, the key question is whether the manager has the discipline and incentive structure to turn down assets that may be out of favor or that do not meet underwriting standards.

Where we've landed with Nuveen is somewhere in the middle: strategic partnerships and whole loan purchases directly with non-proprietary origination platforms. This balance allows us to capture better economics by avoiding intermediary fees, while retaining the flexibility to be selective and align investments with portfolio needs across evolving market environments.

The partnership with Nuveen has allowed us to collectively build a large-scale ABF capability that's grounded in deep sourcing relationships and underwritten through disciplined, specialized expertise across a range of collateral. In turn, our ABF strategy has been designed to perform well in all markets and allow us to honor our long-standing commitment to our participants.

What is the most important advice you would offer insurers and pension funds building their own ABF allocations?

Whereas public fixed income strategies tend to generate alpha through active trading and repositioning, private fixed income relies more on proprietary sourcing, disciplined underwriting, and structuring at the outset.

Scale matters in private markets. Understanding where and how alpha is generated helps in selecting the right managers, particularly those with durable access to deal flow and a long track record.

In our experience, the managers best positioned to deliver are those with scale, a consistent underwriting approach and the discipline to apply it through the cycle.